NEW YORK (CNNMoney.com) - Following a strong January, hedge funds fell flat in February, owing to a blah month for the equity markets.

Most of the major hedge fund indices produced average returns of between zero and one percent, with Chicago-based hedge fund tracker Hedge Fund Research showing a gain of 0.35 percent for the month. The S&P 500 finished February up just 0.05 percent.

Hedge funds are private investment vehicles available only to wealthy individuals and institutional investors. A hedge fund can follow a wide variety of investment styles, investing in anything from distressed companies to foreign debt, but the vast majority invest in stocks.

Few managers of equity long/short funds, which take both long and short positions in stocks, posted big losses, with most falling in the flat-to-slightly positive range. Long/short funds comprise the most common hedge fund strategy. HFR's long/short hedge fund index showed a loss of 0.06 percent.

Some of the larger long/short equity funds posted big gains, such as Mark Kingdon's M. Kingdon Offshore fund, which returned 2.1 percent in February and is up 4.9 percent this year. Noted value investor David Einhorn's Greenlight Capital Offshore fund gained 2.4 percent in February, bringing it up to 4.5 percent for the year.

But most managers struggled to post gains in what was a tough month for the broader markets as a whole. Art Samberg's Pequot International fund was down about a percent but is still up about 6.2 percent on the year following a strong January.

"February was basically flat in equities," said Joshua Rosenberg, president of Hedge Fund Research. "Obviously, that affected equity long/short managers."

Managers who were able to produce gains in February likely had better luck on the short side. Managers complained that January had been a tough month for shorting stocks, but Benjamin Bornstein, who manages three funds through his firm Prospero Capital, said February was a decidedly better month for shorting stocks.

His firm's long-only fund was flat for the month, but its long-short fund and market-neutral fund, which owns equal numbers of long and short funds, both posted gains.

One bright spot for the month: convertible bond funds. These funds had a famously tough year in 2005, with a handful of big funds forced to close their doors amid a year of terrible market conditions.

February marks a second straight month of gains for these funds, which invest in bonds that can be converted into common stock. The HFR convertible arbitrage index showed gains of 1.23 percent in February and is up 3.6 percent for the year.

"When you see big swings in equity markets, as you did from January to February, the market is clearly showing a certain level of volatility, and that benefits convertible fund managers," said Rosenberg.

Another strategy that's having a good year so far is merger arbitrage. These managers invest in the stocks of companies that have announced they are making acquisitions or are the targets of acquisitions.

"So far that's off to a great start," said Rosenberg of the strategy. "Some stock volatility may be a factor there; clearly the natural hedging nature of merger arbitrage protects it more from downside risk when the broader markets (are down)."

The HFR merger arbitrage index finished the month up 1.1 percent and is up 4.4 percent for the year to date.

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